the following data relate to the operations of lim corporation a wholesale distribut 689093

PROBLEM 1 Completing a Master Budget [L04] The following data relate to the operations of Lim Corporation, a wholesale distributor of consumer goods: Current assets as of December 31: Cash………………………. $6,000 Accounts receivable…………… $36,000 Inventory…………………… $9,800 Buildings and equipment, net ……… $110,885 Accounts payable ……………… $32,550 Common shares……………….. $100,000 Retained earnings ……………… $30,135 a. The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.) b. Actual and budgeted sales data are as follows: December (actual) …… $60,000 January ………….. $70,000 February………….. $80,000 March……………. $85,000 April …………….. $55,000 c. Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales. d. Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold. e. One quarter of a month’s inventory purchases is paid for in the month of purchase; the other three quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory. f. Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (excluding depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is $2,400 for the quarter and includes depreciation on new assets acquired during the quarter. g. Equipment will be acquired for cash: $3,000 in January and $8,000 in February. h. Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $ 1,000 at the beginning of each month, up to a total loan balance of $50,000. The…